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Bankruptcy and Student loans

Will Bankruptcy Get Rid of My Student Loans?

In most cases, bankruptcy will not get rid of your student loans.  Over the past twenty years or so, Congress has changed the Bankruptcy Code to increase the protection offered to student loan creditors.  Under the current law, there are very few instances in which a debtor can use bankruptcy to discharge student loans.

If you or someone you know filed bankruptcy years ago, you may remember that student loans used to be dischargeable based on their age.  If your student loan came due XYZ years prior to filing, it could be eliminated in a Chapter 7 or paid as a general unsecured debt in a Chapter 13.

Student Loans Not Dischargeable Except in Rare Circumstances

In the 1980’s and 1990’s Congress began changing how student loans were to treated in bankruptcy.  Now, a student loan is not dischargeable in bankruptcy except in extreme circumstances.  As a practical matter, you can only fully or partially discharge your student loan obligation if there is some special circumstance - usually with a medical basis - that leaves you unable to have any hope of paying your student loan.

Tennessee judges look at these “undue hardship” claims very carefully and on a case by case basis.  Not surprisingly, very few undue hardship discharges of student loans debts are granted. 

If you are filing a Chapter 7 case, your student loan will survive your bankruptcy.

If you are filing a Chapter 13 case, you will generally want to monthly student loan obligation directly as part of your budget.

You should also be aware that the protection against discharge applies to all student loans, whether “government backed” or not.   The term “educational benefit” loan also applies to loans made directly by the school.


Clark & Washington, Attorneys, 6025 Lee Hwy., Suite 101, Chattanooga, TN 37421 Phone: 423-634-1910